Alfred owned a term life insurance policy at the time he was diagnosed with a terminal illness. After paying $18,300 in premiums, he sold the policy to a company that is authorized by the state of South Carolina to purchase such policies. The company paid Alfred $125,000. When Alfred died 18 months later, the company collected the face amount of the policy, $150,000. As a result of the sale of the policy, how much is Alfred required to include in his gross income?
Alfred owned a term life insurance policy at the time he was diagnosed with a terminal illness. After paying $18,300 in premiums, he sold the policy to a company that is authorized by the state of South Carolina to purchase such policies. The company paid Alfred $125,000. When Alfred died 18 months later, the company collected the face amount of the policy, $150,000. As a result of the sale of the policy, how much is Alfred required to include in his gross income?
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 23CE
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Transcribed Image Text:Alfred owned a term life insurance policy at the time he was diagnosed with a terminal illness. After paying
$18,300 in premiums, he sold the policy to a company that is authorized by the state of South Carolina to purchase such
policies. The company paid Alfred $125,000. When Alfred died 18 months later, the company collected the face amount
of the policy, $150,000.
As a result of the sale of the policy, how much is Alfred required to include in his gross income?
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